Reports from the Economic Front

by Martin Hart-Landsberg

Archive for August, 2012

Economics And Values

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Mainstream economics is largely built on theories that assume that people are best understood as highly competitive and individualistic maximizing agents. In fact, capitalism is said to be the most desirable economic system ever constructed precisely because its laws of motion are in sync with these traits.  Capitalism’s desirability is easily called into question, however, if people highly value fairness, cooperation, and relations of solidarity.  After all, capitalist imperatives tend to work against the development of social conditions and institutions that promote these values.

Many supporters of capitalism draw upon studies of non-human animal behavior to defend their assumptions about human nature.  But, as the Ted Talk by Frans de Waal found here (and below) demonstrates, non-human animals also greatly value fairness, cooperation, and relations of solidarity.

After watching the video take a few moments to imagine an economic system that builds upon these attractive values, then compare the policies that would be helpful to create it with the policies we currently promote to strengthen our existing economic system.  For example, how would this foundational shift influence our thinking about how best to organize production, relate production decisions to social and community needs, structure the ownership of society’s productive assets, and so on.

 

 

 

Free Trade As A Coroporate Project

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I was recently interviewed by David Delk on his Populist Dialogue cable TV program.  I shared my criticism of free trade as a corporate project, looking in particular at the Transpacific Partnership Free Trade Agreement (which the president is aggressively promoting) and the U.S.-Korea Free Trade Agreement (which was recently passed).

The 30 minute program can be watched here or below.

For more on the Transpacific Partnernership Free Trade Agreement see here and here.

For more on the U.S.-Korea Free Trade Agreement see here, here,  and here.

 

The Election And The Economy

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Its election season and Republicans and Democrats are working hard to demonstrate that they support dramatically different policies for rejuvenating the economy. 

While the Democratic Party’s call for more government spending makes far more sense than the Republican Party’s call for cuts in government spending (see below), the resulting back and forth hides the far more serious reality that our existing economic system no longer appears capable of supporting meaningful social progress for the great majority of Americans.  

The chart below helps to highlight our economy’s worsening stagnation tendencies.  Each point shows the 10 year annual average rate of growth and the chart reveals a decade long growth trend that is moving sharply downward.  

As David Leonhardt explains:

The economy’s recent struggles arguably began in late 2001, when a relatively mild recession ended and a new expansion began. The problem with this new recovery was that it wasn’t especially strong. From the fourth quarter of 2001 through the fourth quarter of 2007 (when the financial crisis began), the economy grew at an average annual rate of only 2.7 percent. By comparison, the average annual growth rate of both the 1990s and 1980s expansions exceeded 3.5 percent.

This mediocre expansion was followed by the severe recession and weak recovery brought on by the financial crisis. The combined result is that, in recent years, the economy has posted its slowest 10-year average growth rates since the Commerce Department began keeping statistics in 1947.

In fact, the economic growth figures for the period 1995 to 2007 were artificially propped up by a series of bubbles, first stock and then housing.  Once those bubbles popped, average growth rates began steadily falling.  

The weakness (and unbalanced nature) of our current weak recovery is well captured in the following chart from Catherine Rampell, which compares the percent change in various indicators in the current recovery (which began in June 2009) with previous post-war recoveries.  The first point to stress is that the current recovery lags the average in all indicators but one: corporate profits.  The second is that government spending has actually been falling during the current recovery, no doubt one reason that the percent increase in so many indictors remains below the average in previous recoveries; the public sector is actually smaller today than it was three years ago.

The relative strength in the performance of corporate profits helps to explain why the two established political parties feel no real pressure to focus on our long term economic problems; corporations just don’t find the current situation problematic despite the economy’s weak overall economic performance.  

Even more telling of the growing class divide is the explosion in income inequality over the last thirty years, which is illustrated in the following chart.

In other words, while corporations have succeeded in raising profits at the expense of wages, those in the top income brackets have been even more successful in raising their income at the expense of almost everyone else.  Notice, for example, that median household income in 2010 is roughly where it was in the late 1980s while the median income of the top households racked up impressive gains. Thus, the very wealthy have every reason to do what they are currently doing, which is using their wealth to ensure that candidates restrict their economic proposals to reforms that will do little to change the existing system.

The takeaway: without a mass movement demanding change, election debates are unlikely to seriously address our steady national economic decline.

“Occupy” With Chinese Characteristics

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The Asia Times Online calls it “‘Occupy’ with Chinese Characteristics.” Whether Chinese activists identify with the Occupy Movement is unclear.  What is clear is the growing activism of:

a confrontational vanguard of young people – high school students and twenty-somethings (collectively known as “after 80s” and “after 90s” for their birth years) who appear quite happy to mix it up violently with the cops and cadres.

The most recent confrontation took place on July 28thin Qidong.   Qidong, as the Austalian Socialist Alternative explains,

is located on an estuary of the Yangtze River; across the way stands China’s biggest city, Shanghai. The Yangtze River Delta is one of China’s richest regions, but high speed economic development has come at the cost of severe environmental destruction. For example, more than half of coastal areas in Jiangsu province (where Qidong is located) are categorised as “seriously polluted zones” by the Ocean and Fishery Bureau. The main source of pollution is the industrial wastewater illegally discharged by corporations.

The Chinese government wants to build a new pipeline that would take wastewater from a special economic zone near Shanghai to a major Qidong fishing port on the Yellow Sea.  The pipeline would serve a paper mill and nearly completed pulp plant, both of which are owned by a large Japanese multinational, Oji Paper Company of Japan.  The people of Qidong don’t believe Chinese government claims that the wastewater will be safe and have voiced opposition to the pipeline since 2009 when the government first proposed its construction.  

THE RESISTANCE MOVEMENT IN ACTION

Here is a report from a Japanese newspaper about what happened in Qidong:

About 5,000 people filled the streets in central Qidong before 6 a.m., when the rally began. The protesters began chanting, “Protect the environment” against the dangers posed by a plan for a drainage pipeline into local waters.

But less than 10 minutes later, the crowd broke through a row of police officers blocking the main street and started marching toward the city government building 1 kilometer away. The demonstrators became louder after they reached the building.

Several minutes later, they pulled down the steel gate and swarmed over the premises.

About 2,000 occupied the inner courtyard, several thousand on the street in front of the city government building and many others in nearby structures overlooking the building, bringing the total of protesters to more than 10,000.

Here are some pictures that help to give a feeling for the day’s events:

 

This was, as Socialist Action describes, a well planned action:  

In order to stop this disastrous project, small-scale protests had been occurring since June, but were suppressed by the local government with various means. When China’s summer school holiday began in July, many students in Qidong decided to help build a bigger protest movement. They used social media to spread the information, but also produced many leaflets “To the people of Qidong” and distributed them in shopping centres and other public spaces. . . .

Big banners of petition with countless signatures were carried in the middle of the column, saying “Resolutely Resist Oji Paper Discharging Wastewater at Qidong”. Organisers equipped with megaphones led the chanting: “Opposing Oji Paper, defending our home!” A teenage woman, holding an anti-pollution t-shirt with her mother, marched proudly in the front of the contingent. More people arrived. The demonstration was growing like a rolling snowball.

People were taking photos from the roadsides and posting them online. Within hours, the news of Qidong had spread like a wild fire nationally. . . . Some shops offered free bottled water and bread to the protesters as support.  A 70-year-old woman reproached the cops: “These kids are doing the right thing, don’t disrupt them.” Most of the police personnel who arrived in the morning were local residents, whose families would be affected by the pollution as much as the protesters, so they generally sympathised with the cause. Moreover, they were heavily outnumbered so could not stop the protesters anyway!

Outside the municipal building, the protesters demanded that the government stop Oji Paper from building industrial wastewater pipes. The officials rejected the demand with the excuse that the government would have to pay a great amount of compensation to the company if they cancelled the project. The response enraged the crowd and thousands of protesters stormed the building. They surrounded the party secretary (the highest government official in a city) and asked him to wear an anti-pollution T-shirt. On his refusal the protesters stripped him naked and chased him around.

Large quantities of poker cards, condoms, expensive cigarettes and imported wine were found in those officials’ offices. These things were displayed on the roadside as evidence of government corruption.

The outcome, as reported by Asia Times Online, was a victory for the demonstrators:

The announcement posted on the Qidong municipal website on July 28, the same day as the demonstrations, stated:

After careful considerations, the Nantong City Government has decided to halt the implementation of the Nantong Large-Scale Project for Expelling Standards-Meeting Water into the Sea in Qidong.

An electronic billboard in Qidong displayed a less nuanced, more crowd-pleasing message on the same day, even as demonstrators were gathered in the city center:

After careful consideration, the Nantong City Government has decided to cancel this project for ever. 

MOVEMENT BUILDING

The Qidong protest was no isolated event.  For example, it followed the three day June struggle in Shifang (in Sichuan province, Southwest China) to halt the construction of a copper smelter.  According to Asia Times Online,

In Shifang, activists among a crowd of several thousand attempted to bumrush the municipal government building, but were repelled in a police action that turned into something of a police riot. The result was dozens of serious injuries inflicted on agitators, demonstrators, and hapless bystanders alike, and a marked swing in national popular sympathy toward the demonstrators.

Despite the repression, the activists did succeed in forcing the government to cancel the project.  Socialist Action notes that the Shifang action was itself inspired by:

a 100,000-strong demonstration in Dalian (in Liaoning province, Northeast China) last year, which compelled the local government to promise to move a chemical plant. . . . 

From Dalian to Shifang, then to Qidong, young people dominated. They used social media to organise their actions, their enthusiasm to agitate the masses and their bodies to fight the cops. Many of them were born after 1989, but they have inherited the spirit of Tiananmen Square. Such a generation of youth are not only active in environmental struggles, but also in the strikes taking place in the factories of Pearl River Delta, in the land rights uprisings occurring in the villages of Guangdong, in the battles against police brutality that occur in every city on a daily basis.

There is a lot going on in China that is not reported in this country.  While there is indeed labor repression there is also resistance fueled by the desire of many Chinese to change the direction of their country. Rather than seeing ourselves locked in some kind of zero sum economic competition with China, we should be looking to connect with Chinese activists, sharing experiences and strategies.  After all, we also are in desperate need of a change in direction.

Written by marty

August 6th, 2012 at 5:33 pm